What Is SEZ?

An SEZ is a part of India set aside for export-focused business. Units inside the zone work under a special framework with duty-free imports and fiscal incentives, and with fewer procedural hurdles. The official SEZ portal describes SEZs as designated economic areas built to promote exports and attract foreign investment. Each zone has a Development Commissioner, and a Board of Approval reviews proposals and policy matters. A business outside the zone that sells to an SEZ unit has its own rules for that supply, which should be checked with a tax adviser.

For example, a software company sets up a unit inside an SEZ and serves clients in Europe. The unit operates under the SEZ framework and deals with the Development Commissioner of its zone for approvals.

• Incentives: The SEZ portal lists duty-free imports and fiscal incentives at central and state levels as key benefits. Which incentive applies depends on the Act and current rules for your unit.
• GST: Supplies to and from SEZ units have their own GST treatment. Ask your tax adviser or check the GST portal. Related ideas are in zero-rated supply.
• Income tax: Tax benefits for SEZ units depend on the law in force for the year. Confirm with your chartered accountant, as the Income-tax Act, 2025 now applies.
• Bank compliance: SEZ exporters still receive foreign payments through AD banks and follow FEMA reporting. Read SEZ and EOU payment rules.

An SEZ works by giving notified zones and their units a separate administrative and fiscal framework for exports.

1. The government notifies a zone under the SEZ Act, 2005.
2. A Development Commissioner oversees the zone and its units.
3. A business applies for approval to set up a unit in the zone.
4. The unit imports, produces and exports under the SEZ framework.
5. Export receipts come through an AD bank and are reported under FEMA like other exports.
6. The unit files the returns and reports that the SEZ and tax rules require.

You apply to the Development Commissioner of the zone where you want to operate, with a proposal for the unit. The SEZ India portal is the official starting point, and the exact documents and process are set out by the Commerce Ministry and the zone office.

1. Pick a notified zone that fits your activity.
2. Contact the Development Commissioner's office of that zone.
3. Prepare the proposal and documents the office asks for.
4. Wait for approval from the competent authority.
5. Set up your bank account and AD bank link for export receipts.
6. Read the payment points in SEZ and EOU payment rules.

• Any export unit: Only units inside a notified zone and approved by the zone authorities are SEZ units. An exporter elsewhere is not an SEZ unit.
• Free from FEMA: SEZ units still follow FEMA for foreign receipts and use AD banks.
• Same as EOU: An EOU is an approved unit under the Foreign Trade Policy. An SEZ is a notified zone under a separate Act.
• Benefits never change: Incentives depend on the Act, notifications and tax law at the time, so check current rules.

• EOU: A unit approved to export most of its output under the Foreign Trade Policy.
• RoDTEP: A remission scheme for exported goods.
• LUT: An undertaking that lets exporters supply without paying IGST.
• Zero-rated supply: A supply on which no tax is charged and input tax can be refunded.
• DGFT: The authority that runs the Foreign Trade Policy.

Every rule and definition on this page is linked to its official source, checked on the dates below.

1. Special Economic Zones in India, SEZ India portal, Definition, SEZ Act 2005, Development Commissioners, Board of Approval, operational zones (checked 9 Oct 2026)